The number of local corporate bankruptcy filings is down by as much as 19 percent so far this year when compared with the year-ago period, as the economy continues its slow recovery.

There were 14,482 new Chapter 7 bankruptcy liquidation cases filed in the first five months of 2012, down 18.9 percent from 17,866 cases in the year-ago period and down 32.7 percent from a high of 21,522 cases for the same period in 2010, shows Orlando Business Journal research.

There were 223 new Chapter 11 bankruptcy reorganization filings through the first five months of 2012, down 10.8 percent from 250 filings in the year-ago period and down 42.8 percent from a high of 390 filings for the same period in 2010.

Bankruptcy experts estimate half of all companies entering Chapter 11 reorganization will be able to emerge successfully, rather than converting to Chapter 7 liquidation.

In September 2010, the Orlando-based company was nearly $150 million in debt and filed for Chapter 11 bankruptcy reorganization. As part of that process, it wrote off more than $140 million in debt, divested interest in its Chenay Bay Beach Resort in the U.S. Virgin Islands and put the kibosh on any plans to expand its timeshare business before emerging from bankruptcy protection in May 2011.

The company reduced its work force of 600 by nearly 100 prior to the bankruptcy filing due to economic pressures.

When Island One Resorts emerged from bankruptcy protection, it had only $6 million in debt and kept eight properties that include Barefoot’n Resort in Kissimmee; and Bryan’s Spanish Cove, Liki Tiki Village, Orbit One Vacation Villas and Parkway International Resort in Orlando.

The Chapter 11 process “freed up a lot of cash flow and allowed us to focus on moving forward,” said Stoudenmire. “It allowed us to clean up our books.”

Companies best suited to emerge from bankruptcy have good managers, steady cash flow and aren’t spread too thin. In addition, third-party mediation between bankrupt companies and their creditors helps minimize the time spent in courtrooms, thus, reducing legal fees.

Jon E. Kane, a bankruptcy attorney with Burr & Forman LLP in Orlando, said many of the cases now going through the system are the typical pre-recession bankruptcies as businesses try to do a quick reorganization, continue doing business and move on. “Everything is cyclical. The businesses that have tapered back and are leaner are the ones surviving.”

Bob Higgins, a bankruptcy lawyer at Lowndes, Drosdick, Doster, Kantor & Reed PA, agreed. “Two contributing factors we have seen with respect to real estate issues are the properties being so undervalued that a reorganization would not be feasible. And in some cases, lenders have been willing to sell or settle a note for less than the amount due, which has eliminated the necessity for entities to file for bankruptcy.”

Types of bankruptcy

• Chapter 11: A company unable to pay its debts in full continues to operate during reorganization and establishes a plan to pay creditors.

• Chapter 7: Generally when a company unable to pay its debt has its assets liquidated and sold by a court-appointed trustee, with the proceeds used to pay creditors.

What this means to you

• Fewer risks of not being paid when entering agreements with other companies